Setting up your own online business comes with a lot of choices, from choosing a business model to work with, through to branding your business consistently. It also comes with a lot of financial planning.
According to Forbes, around 90% of startups fail. So it’s vital to plan carefully and develop financial literacy if you’re planning to set up your own business. If you’re in the early stages of running a business online, these tips will help you make sound decisions around how to organise your finances, and keep control of your cash flow.
Use online calculators to make accurate predictions
There’s no need to sit down with paper and pen to try and work out your business finances. There are online calculators that can help you make quick and accurate predictions around your finances. I like the free-to-use online calculators over at Pigly.com. They allow you to calculate everything from savings and loans, to cash flow and net worth.
I particularly like their cash flow calculator. It’s an excellent way to help you budget, taking into account all your income streams and expenses. For my multi-level marketing followers, there are even MLM calculators to help you predict future commissions, based on your commission levels and downstream info.
Set your rates carefully
Whatever type of online business you run, it’s vital to consider how much to charge for your services. If you’re a coach, consultant, or virtual assistant you’ll probably charge by the hour. If you’re a freelancer, you may find a per-project rate is better than a hourly rate.
Freelance writers need to be especially careful. It’s common to set, and be offered, a per-word rate as a writer. But a lot depends on the type of writing you’re offering. Writing sales or ad copy is a skill that actually involves trying to create maximum impact in as few words as possible. Copywriters don’t generally charge by the word, and it wouldn’t be as lucrative as it is if they did. If this is your niche, take a look at the different ways freelance writers set their rates.
Consider PayPal invoicing
PayPal is still one of the most trusted and popular online payment systems. The fees on their business accounts can be a little steep. However, many solopreneurs think it’s worth it for the easy, built-in invoicing system. You can create an invoice in under a minute with their fill-in-the-blank, professional looking templates. There’s the flexibility to charge by the hour or simply insert a flat fee for a project. There’s also space to break things down and list the actual activities carried out, if you want to produce a more detailed, itemised invoice.
Some of my clients have their own invoicing systems, and if you work through any kind of agency or third party site, such as Upwork or Guru, invoicing is taken care of within the system. For independent clients, however, who don’t have their own system set up, PayPal invoicing can be the perfect solution.
Make tax season easier
Consider using an online accounting system that takes care of day to day finances for you. I use QuickBooks. I simply link it to my bank account and PayPal account and it calculates monthly income, expenses and profits, and estimates how much I currently owe in taxes.
It’s advisable to have separate accounts for business expenses, but even if you run a small side hustle and use your personal account, this system can work. You simply allocate every expense and payment as either ‘business’ or ‘personal’. This can be done manually, or by setting up rules within your account.
You’ll still need to check your finances carefully, and it’s likely you’ll need to consult a tax professional too, but using automated accounting systems can make his or her job easier.
Know when to consult a professional
Finances can be complicated. There are many times you’ll find you need advice from a qualified professional. There are various types to choose from, with cost ranging from free to very expensive. Wealthtender.com has an in-depth guide to financial professionals if you’re not sure who does what, how much it costs, or when to consult them.
Disclaimer: The information in this article is not intended to encourage any financial decisions without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.